Thursday, November 21, 2019

Rental Unit Owners Risk It All

For most people, their home is their biggest asset. It is cherished, protected and maintained to the best of their ability.  Obviously, this costs money and when a way to monetize this asset appears so that apart if not all the upkeep costs can be defrayed, it is an opportunity that many homeowners jump at. Even otherwise, the additional source of income is something homeowners don’t want to let go of. This is one of the reasons why Airbnb has seen such phenomenal growth over the last few years. A second or vacation home may be lying empty for a good part of the year. Why not turn it into a rental with Airbnb and earn some money when the owners are not using it? If the owners are empty nesters with more space than they need, why not turn part of the home into a rental and make some extra money? There are many reasons to sign up with Airbnb and the process is a simple one. Only a few people think of the risks involved. After all, the rental space is not being used, the valuables have been removed and if anything should be damaged, there is always insurance to cover the cost of repairs is how people reason. Unfortunately, that is not the case.

The Risk

The people who will live in your home are strangers. Sure, they have come through Airbnb so they have been checked out, at least to some extent. But that is no guarantee that they are really who they appear to be. It could be that they are the sort who simply don’t care about other people and their property and will treat the home they are staying in with contempt, leaving the owner with a mess to clean up after they have gone. Or they could be the nicest of people who have unfortunately had an off day which results in accidental damage to the home and what is in it. In the worst-case scenario, the actions of the short term renters could lead to the home being badly damaged or even destroyed.

The Protection (Or Lack of It)

All homeowners have these thoughts in mind when giving control of their home to strangers. However, they also believe that the one-off possibility of bad things happening is no reason to lose out on the easy additional income as even in the worst case, Airbnb insurance and/or the homeowner’s policy will cover the damage or the loss. However, this is not the case. In a recent incident, Airbnb insurance refused to pay when the renter of a $1 million home burnt it to the ground. The home insurance policy declined to pay because the home was being used for business purposes which is excluded from the coverage.

The Solution

What homeowners do not realize is that they need extra coverage if their properties are being used as Airbnb rentals. There are special vacation rental property policies that offer the owners the protection they need. Few insurance agents are aware of or understand this coverage. If you are renting out on Airbnb, contact an insurance broker who is aware of the protection that is available to you and will help you find the right coverage to keep you and your home protected.

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Thursday, November 7, 2019

Wildfires Are Back

Wildfires – just when you thought they were over, rear up again. The second coming of the wildfire season this year has been worse than the first. Californians accept that the dangers of earthquakes and wildfires are the price they have to pay to live in the Golden State. Earthquakes are still a force of nature that have not been fully understood and when and where they happen is of course beyond human control. Wildfires too are usually, though not always, acts of nature. The difference is that the frequency and intensity of these fires are steadily increasing. So too is the area that is affected, which is constantly expanding.

It’s Been a Bad Year

Strong Santa Ana and Diablo winds, extremely low moisture levels, drought conditions and an abundance of tinder are among the many reasons why the state is so prone to wildfires. Long term changes to the climate and the environment mean that the situation will only get worse in the future. This year, as of the end of October:
  • The Kincade fire has burned over 66,000 acres.
  • 96 structures, including 40 homes have been destroyed.
  • 80,000 people remained threatened.
  • The Getty fire has burned500 acres.
  • A large number of homes in high-value areas like Brentwood have been damaged or destroyed.
  • Millions of homes have been left without power after electricity was cut off for safety reasons.
  • The damage and loss caused by other fires are still being calculated.
As bad as this year has been, expect both the extent of the risk and the areas where wildfires occur to increase in the future.

Are You Properly Protected?

Statistics show that most of the homes in California are underinsured. The desire to save money by limiting coverage is understandable. However, when the perils that homes face are increasing, the desire to cut back on insurance is becoming an unacceptable risk and one that is rapidly increasing. Over the last few years, there have been a huge number of cases where the insurance coverage for homes damaged or destroyed by wildfires has not been enough to cover the full repair or rebuilding cost and the other expenses that arise while the home is uninhabitable. These homeowners have faced immense financial hardships in trying to rebuild their lives.

Insurance companies are watching this year’s developments closely and it is likely that insurance premiums will go up again as they did in 2017 and 2018 when the wildfire damage resulted in huge payouts and a resulting rise in insurance rates. Expect rates to go up in the next few months when the full extent of this year’s losses have been evaluated. Hence, this is the time to contact a trusted insurance professional who will be able to help you balance the increasing risks your home faces, the rising cost of insurance and the need to have the kind of coverage that will give you and your family the protection you need.